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Boston Consulting Group Says Blockchain in Commodity Trading Is Overhyped

8 min read Today, almost everyone agrees that blockchain is a revolutionary technology. Well, those who don’t like exaggerations would at least say that it had a transformative potential. Even Bitcoin and cryptocurrency skeptics like JPMorgan consider blockchain a genuine technology. The distributed ledger technology (DLT), as blockchain is also called, has been trialed in various…



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Today, nearly everybody has the same opinion that blockchain is a progressive generation. Well, those that don’t like exaggerations would no less than say that it had a transformative doable. Even Bitcoin and cryptocurrency skeptics like JPMorgan imagine blockchain a real generation. The allotted ledger generation (DLT), as blockchain is also referred to as, has been trialed in more than a few industries for dozens of use instances. From monetary transactions to provide chain control and commodity buying and selling, blockchain proved that it might speed-up processes, cut back the will for intermediaries, and minimize prices amongst others. However, consistent with a contemporary record revealed by means of Boston Consulting Group (BCG), a US-based main consulting company, discovered that using blockchain in commodity buying and selling was once overhyped and had many drawbacks on a number of fronts. The find out about was once just a little disappointing for blockchain lovers, however it didn’t deny the transparent advantages of the emergent generation.

What does the BCG find out about conclude

The BCG report, titled “a reality check for blockchain in commodity trading” printed that the implementation of DLT was once no longer really useful for all of the events taken with commodity buying and selling processes. For instance, service provider buyers are used to rely on marketplace inefficiencies to generate cash, and blockchain would possibly negatively affect their place by means of bringing extra transparency and accuracy.

However, that is best some of the a number of drawbacks firms will have to imagine. Senior executives shouldn’t pass loopy about blockchain best as a result of it’s fashionable. Even regardless that there are a number of plain advantages, there are a couple of choices that could be more cost effective than switching to a posh DLT infrastructure. The advantages of blockchain in commodity buying and selling are exaggerated, the BCG concludes.

Still, DLT can effectively deal with a number of dangers associated with fraud, items high quality, or clearing amongst others.

BCG Blockchain

Blockchain may just additionally give a boost to the regulatory oversight and reporting. As of these days, contributors have to arrange compliance stories, however a DLT platform would permit regulators to investigate cross-check buyers in actual time by means of having access to the shared ledger.

BCG analyzed the generation within the context of various commodity markets, together with energy and gasoline, oil, iron ore, diamonds, and agricultural commodities. The consulting company attempted to outline the DLT’s talent to become commodity buying and selling by means of specializing in a number of components for every marketplace, equivalent to:

  • Pricing complexity and variety;
  • Transaction volumes;
  • The want for a foolproof certification of foundation;
  • The want for a extra environment friendly infrastructure.

Blockchain Driver

Thus, the consulting company concluded that the implementation of blockchain would have an effect on the commodity markets another way. For instance, the ability and gasoline marketplace is already profiting from prime requirements of transparency, so blockchain could be principally required for streamlining the agreement of transactions.

In the top, the BCG authors weren’t inspired by means of the guarantees of blockchain for the marketplace usually. Co-author Antti Belt told Reuters:

“There are so many pilot schemes but none have become real production scale systems yet. One of the problems is that it’s not designed for physical trades. The fundamental issue: how do you track a physical entity in a virtual world? It’s two worlds colliding.”

“People have spent millions, sometimes over $100 million, on IT system, do they want to do it again?” he rhetorically requested.

Companies embracing Blockchain for commodity buying and selling

Even regardless that the BCG believes blockchain isn’t a panacea within the commodity marketplace, some firms are nonetheless open to adopting the generation. Last 12 months, oil giants British Petroleum (BP), Royal Dutch Shell, and Statoil, along side a number of main banks and buying and selling properties, said that they deliberate to shape a blockchain consortium and challenge to construct a commodity buying and selling platform.

In February of this 12 months, the firms stated that they’ve already trialed the generation and so they have been happy with the effects. According to Alistair Cross, who works for Mercuria Energy Group, which may be a part of the consortium, blockchain is superb at dealing with expenses of lading – the paperwork associated with shipment possession in commodity buying and selling. The DLT implementation would scale back bureaucracy, get rid of mistakes, and minimize prices, he stated.

“The way we do our title transfers and post-trade execution is very heavy on paperwork. And the paperwork hasn’t really evolved over the last couple of hundred years,” Cross told Bloomberg.

Elsewhere, Swiss-based company Open Mineral, which operates an web alternate platform for steel concentrates, announced closing month the collaboration with New York-based blockchain device developer ConsenSys to shape a consortium for mining firms (to not be puzzled with cryptocurrency mining). The team is ready to broaden a platform for minerals buying and selling and logistics. Minerac, as the impending platform is named, will permit events to simply observe minerals all through the entire provide chain, from mining to delivery and warehousing. Open Mineral is a tender startup subsidized by means of a bunch of buyers from Glencore.

In conclusion, we might say that 2017 was once the 12 months of blockchain trials and experiments, whilst this 12 months many firms are if truth be told adopting the generation. Even regardless that BCG says blockchain is overhyped, firms will have to assess its doable in my opinion and make their very own conclusions.

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NOTE: This article isn’t an funding recommendation. Any references to ancient value actions or ranges is informational and in line with exterior research and we don’t guaranty that one of these actions or ranges are prone to reoccur someday.

In accordance with European Securities and Markets Authority’s (ESMA) necessities, binary and virtual choices buying and selling is best to be had to purchasers labeled as skilled purchasers.


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